What are the benefits to building the majority of future UK households on previously used sites?
Lack of information and general misconceptions may have prevented development on brownfield sites in the past.
In the UK there is an estimated 360,000ha of previously used land, a considerable proportion of which is undeveloped. With strong housing demand and the current boom in city living, such a resource offers landowners and developers considerable potential. Yet the view remains that brownfield development is more trouble than it is worth. Indeed, brownfield development can be more complex than greenfield construction. Add to this an element of land contamination, and confidence wanes.
Recent research funded by RICS revealed that any kind of contamination is seen as a difficult liability, which depresses land values and therefore reduces economic viability of regeneration projects. There is also a lack of confidence in the outcome of remediation processes, generally fuelled by poor advice about the risks involved. The combined effect is a belief that brownfield development is not a viable investment.
Does this really give a fair assessment of the situation? Certainly there are disadvantages associated with developing previously used land, but as those who have ventured into this area will testify, the problems are usually outweighed by the benefits.
Potential opportunities in respect of previously developed sites may include:
The May 2001 Finance Act enabled companies to claim 150 per cent of the qualifying expenditure on remediating contaminated land. The existence of the new tax relief is an added factor to be taken into account in negotiations between parties regarding the transfer of contaminated land. The Inland Revenue has confirmed that removal or treatment of asbestos in buildings will qualify for contaminated land tax relief.
VAT Companies should also consider the position on VAT on qualifying expenditure as to when or when not to elect for VAT in respect of the project. This is particularly important for refurbishment projects.
Exemption from landfill tax may be a consideration for elements of the project. The law does not allow HM Customs and Excise to issue backdated certificates, and any waste removed before a certificate is issued will not be exempted from landfill tax. An application must be made 30 days before the developer intends to start removing the waste to landfill.
The exemption is only obtainable if the reclamation of the land constitutes or includes clearing the land of pollutants that would (unless cleared) prevent the land being put to the intended use. Subject to other qualifying circumstances, asbestos waste cleared from buildings will qualify for landfill tax exemptions.
From 30 November 2001, all property sales and assignments of existing leases for £150,000 or less that relate to land in the UK's most disadvantaged areas (specified in the regulations SI 2001/3747) have been exempt from ad valorem stamp duty. From the same date, grants of new leases relating to land in disadvantaged areas have been exempt from ad valorem stamp duty on premiums of £150,000 or less.
However, financial risk cannot be entirely removed from the equation, and similarly it cannot be denied that the processes involved can be quite complex. But it is clear that if landowners and developers are to reap the potential benefits offered by reclaimed land, they need to have the confidence and the skills to manage both the intricacies of detailed processes and the risks they entail.
The client must identify his own technical limitations and, where external assistance is required, be equipped with the tools to appoint, manage and monitor specialist advisers.With little guidance available and few possessing all the relevant skills in-house, the reluctance to enter this arena is somewhat understandable.
Joanne Kwan is a research manager at CIRIA, www. ciria. org. uk
Clients Guide to building on brownfield sites is priced at £55 to CIRIA Core and New Books Club members and £110 to others.Telephone 020 7222 8891 or e-mail enquiries@ciria. org. uk
'Assessing the impact of the landfill tax on derelict land clearance', DETR,2001, 117pp
'Contaminated land: the practice and economics of redevelopment', Blackwell Science,1997,314pp
'Contaminated land - a review of research at BRE', Building Research Establishment, Report 346,1998
BS 10175: 'Investigation of potentially contaminated sites',2001 l Contaminated land (Wales) regulations 2001.SI 2001/2197,26pp l Contaminated land (Scotland) regulations 2000.SSI 2000/178,22pp